Climate Change and Sustainable Energy Blog

Renewable energy advocates are prodding Congress to extend tax credits, the loss of which they warned could threaten 42,000 megawatts of planned developments and put billions of dollars of potential investments at risk.

As part of the lobbying campaign, in a letter to congressional leaders of both parties, the American Council On Renewable Energy, a nonprofit representing hundreds of companies and groups involved in or advocating the development of wind, solar and other forms of sustainable energy, demanded quick action on investment and production tax credits. Those include a 30 percent investment tax credit for solar projects and about a 2-cent per kilowatt hour income tax credit for qualifying facilities, such as wind. 

In its letter, ACORE argued that extension of the credits would help prevent the cancellation of 42,000 megawatts of renewable projects in 45 states. That's the equivalent of 75 base load electrical generating stations, the organization contended.

Although the incentives are not due to expire until the end of 2008, their champions believe the credits must be renewed earlier than that in order to spur investment. ACORE's letter, carrying 350 signatures of industry leaders, called for Congress to act before March 1:

"A wide, bi-partisan, majority of policy-makers and economic experts agree that tax incentives are absolutely critical to long-term investment and expansion of renewable energy sources in this country, and their absence will have dire immediate consequences to the businesses in this sector in the year 2008."

Other sectors of the industry have also weighed in to pressure lawmakers. The American Wind Energy Association is asking for Congress to extend the production tax credit in the first quarter of 2008. Any further delay, the association warned, and "the impacts on wind industry investment will escalate dramatically as the financial community responds to growing uncertainty as to the future availability" of the credit. The wind group and another organization, the Solar Energy Industries Association, released a consultant's report that predicted a loss of tax credits could threaten $19 billion in investments and 116,000 jobs, with the biggest employment losses hitting California and Texas.

Politicians from some of the states have also thrown their weight behind the effort. California Gov. Arnold Schwarzenegger, in a letter to congressional leaders late last year, called the tax credits critical to renewable energy development:

"California and other states cannot succeed in developing solar projects without the tax incentives until the industry has reached a critical scale of production and deployment and can compete with traditional utility energy services. Companies who invested this year in equipment and personnel to meet the growth in demand stemming from the programs we are undertaking in California are now faced with uncertainty and potential bankruptcy."

Nevertheless, attempts to keep the credits on track have just narrowly failed. In early February, the Senate fell short by one vote of defeating a filibuster blocking an amendment to the economic stimulus bill that included an extension of the production tax credit.

The San Jose Mercury News reported that new efforts are underway, however, including plans by House Speaker Nancy Pelosi to soon bring up a renewable-energy bill. According to the paper, that bill "includes the extension of tax credits through 2011 for facilities that adopt many renewable-energy systems, at an estimated cost of $6.5 billion over 10 years. Solar energy and fuel-cell energy use would qualify for a 30 percent investment tax credit through 2016." It also would include tax credits for cellulosic ethanol, biodiesel production, plug-in hybrid vehicles and energy-efficient improvements to homes and businesses.

But the paper noted that not everyone would be happy:

The loss of revenue in the bill would be offset by a controversial rollback of $13.5 billion in tax deductions oil companies would take for domestic production over 10 years. Oil companies, with the support of the Bush administration, argued that amounted to a tax increase and were able to block a similar measure in the Senate.

(Photo of King Mountain project in Texas courtesy DOE/NREL, credit Todd Spink).